Dynamic Asset Allocation under Stochastic Volatility - Theory and Practice

DOI

10.2991/jcis.2006.93How to use a DOI?

Keywords

asset allocation, stochastic volatility, transaction cost

Abstract

This study develops inter-temporal dynamic asset allocation with stochastic volatility (DAASV) models. The DAASV models integrate the stochastic volatility feature inherent in asset returns into the allocation procedure. By applying the DAASV, an investor can more efficiently diversify the unsystematic risks, so as to achieve better performance. We demonstrate that the DAASV models dominate the traditional mean-variance portfolio models by using Taiwan equity market empirical data. Finally, we show that under the consideration of trade-off between transaction costs and rebalancing timing, an optimal asset allocation rebalancing frequency can be derived.

Copyright

© 2006, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Chung-Gee Lin
PY  - 2006/10
DA  - 2006/10
TI  - Dynamic Asset Allocation under Stochastic Volatility - Theory and Practice
BT  - Proceedings of the 9th Joint International Conference on Information Sciences (JCIS-06)
PB  - Atlantis Press
SN  - 1951-6851
UR  - https://doi.org/10.2991/jcis.2006.93
DO  - 10.2991/jcis.2006.93
ID  - Lin2006/10
ER  -